The starting position therefore, according to CMS, is that third parties should comply with applicable law (including regulatory guidance) applying to the firm, although "this is often strongly resisted by third parties".
Given that there is some resistance, the partners said that in setting out how companies intend to meet their consumer duty obligations, such requirements must be translated into clear obligations built into service descriptions, operating procedures and service levels.
Advisers should also ensure that consumer duty is considered as part of the agenda of relevant governance meetings with third parties.
They should also consider whether existing SLAs need to be updated to ensure third parties provide additional management information and support outcome testing activity regularly.
The partners warned: "Often management information can be limited to relating only to the services provided, which may not be wide enough.
"As part of these considerations, it will be important for the firm to consider how it defines good outcomes (over the short, medium and long term) for customers while using products and services and how SLAs ensure the third parties support these outcomes.
"In particular, the firm will need to consider what outcomes customers are getting from the relevant third party and whether they are aligned with reasonable expectations."
Other considerations
Advisers are already aware of the importance of ensuring oversight and control over any onward sub-contracting by a third party.
In terms of meeting consumer duty requirements, however, it will be important to make sure that meeting the regulatory requirements, and appropriate systems and controls, are imposed on onward sub-contractors where relevant.
CMS added: "Firms may wish to ensure that third parties are obliged to ensure that onward sub-contractors comply with the duty requirements directly, particularly where those onward sub-contractors are unregulated such that the duty does not apply to them directly."
Other things to consider are how companies build in consumer duty considerations to their business continuity and disaster recovery considerations, improving remediation and redress.
They will also have to set how companies approach their exit arrangements while maintaining throughout a transition to an alternative arrangement.
The partners added: "In addition to contractual terms, firms will need to consider how the duty will impact their wider business.
"Firms will be expected to embed the Duty throughout the lifecycle of an arrangement and will need to be able to demonstrate that it is appropriate to outsource the relevant function and consider how that assessment impacts on the firm’s outsourcing policy."
This would include: cultural shifts; aligning third-party cultures to the firm's own; creating specific roles such as 'consumer duty champion'; remuneration structures that drive optimal client outcomes; and better training.
